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Qualcomm Names First 10 Companies to Robotics Accelerator

Thu, 05/28/2015 - 23:09
Bruce V. Bigelow

Following a global recruiting effort that yielded hundreds of applications, San Diego-based Qualcomm (NASDAQ: QCOM) today named the 10 startups selected for the new robotics accelerator program it is operating with Techstars.

The inaugural class includes two San Diego robotics startups, Inova Drone and CleverPet, San Francisco-based Carbon Robotics, and early stage companies from Singapore; Athens, Greece; Rome, Italy; Alberta, Canada; Berlin, Germany, and Bristol, England.

The effort marks a substantial initiative by Qualcomm to accelerate the development of next-generation robots and intelligent machines, and to ensure its own place as a core technology supplier in an emerging market expected to grow fast. Qualcomm established a partnership last October with Boulder, CO-based Techstars, the program for mentoring and investing in seed-stage tech startups, to create what’s known officially as the Qualcomm Robotics Accelerator, powered by Techstars.

Each company admitted to the robotics accelerator gets a $20,000 investment from Techstars in exchange for a 6 percent ownership stake. Qualcomm provides an optional $100,000 loan that can later be converted to stock. Each of the 10 startups accepted the full $120,000 package, according to Houman Haghighi, an operations manager with Qualcomm Ventures who oversees the accelerator.

“The teams and companies were all excited to have Qualcomm Ventures and Techstars on their cap table,” Haghighi said.

Team leaders of the accelerator went on tour earlier this year to promote the specialized startup mentoring program in Las Vegas, Boston, New York, San Diego, and Boston.

Techstars’ Ryan Kuder

In the ensuing months, Haghighi said the robotics accelerator received “several hundred” applications for the program. But he declined to be any more specific, saying the international mix of the accelerator’s first class was a reflection of the applications that poured in from around the world. As Techstars’ manager Ryan Kuder put it, “the combined networks of Qualcomm, Techstars, and Qualcomm Ventures really do span the world.”

Qualcomm also opened its doors to showcase the accelerator’s 7,000-square foot collaborative space, which includes a lab and work stations—and promised access to the deep reserves of technical expertise within Qualcomm itself.

The 10 companies selected for the program:

Reach Robotics, from Bristol, U.K., is developing gaming monster robots that are controlled by a smartphone or tablets. The startup’s Mecha Monsters bridge the physical and digital components of the gaming world, and come with accessories that provide special abilities.

Skysense, based in Berlin, Germany, builds and sells charging infrastructure for drones. Founders Andrea Puiatti and Michele Dallachiesa say their charging station also serves as … Next Page »

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Mitek Expands Mobile Fintech Role by Acquiring Dutch ID Firm

Thu, 05/28/2015 - 13:36
Bruce V. Bigelow

In a deal that targets emerging opportunities in the mobile fintech industry, San Diego’s Mitek Systems (NASDAQ: MITK) has acquired IDchecker, a global provider of identity and document authentication technology.

Mitek, which provides its mobile check-deposit technology to 3,700 U.S. banks, agreed to pay as much as $10.6 million to gain access to cloud-based technologies IDchecker built to verify users’ identities when they use mobile devices to apply for new bank accounts, loans, and other products and services.

Mitek agreed to pay $5.85 million in cash and $2.75 million in Mitek shares to acquire the Dutch technology company. IDchecker CEO Michael Hagen is also joining Mitek as managing director of IDchecker and corporate identity strategist. The company, based in Haarlem, The Netherlands, could earn another $2 million in Mitek common shares if the Dutch tech firm can meet certain income and revenue targets over the next 16 months.

The deal is intended to take advantage of a massive shift in consumer behavior, Mitek CFO Russ Clark said yesterday. As smartphones proliferate worldwide, users are shifting increasingly to mobile devices to open bank accounts, apply for credit cards, and to make online purchases.

While Mitek still has room to grow its mobile banking business, Clark said, “We also believe there’s a huge opportunity in identity verification in transactions.” In fact, Clark said Mitek believes the market for verifying identities in mobile applications and transactions is bigger than the market for mobile bank deposits.

The deal with IDchecker is intended to enable Mitek to expand from the United States into Europe—and through IDchecker, into the global business of providing mobile capture, facial recognition, and multi-factor identity authentication and document verification technologies, Clark said. Mitek estimates the market could be more than $10 billion by 2020.

By acquiring IDchecker, Mitek gains a complementary suite of technologies that strengthens its own capabilities, and includes the following features:

—Facelink matches the facial image on a driver’s license or similar photo document to the user’s actual face.

—StrongID reads and processes utility bills, bank statements, credit cards, telephone bills, and relevant data documents for mobile identity authentication.

—Easy Onboard processes data from more than 3,500 different ID documents from every country in the world, and complements Mitek’s own mobile technology for opening an account. Mitek says its technology can be used to open a new bank account, get an insurance quote, apply for a credit card, originate a loan, and sign up for products and services.

Clark said Mitek’s own imaging technology for processing mobile deposits has been growing at close to 30 percent a year and is now used by nearly half of the banks in the United States, including all of the top 10 banks and nearly all of the top 50. More than 50 million people use the technology to make deposits, he said.

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Milestones Of Innovation 7: FDR Phones Knudsen At General Motors

Thu, 05/28/2015 - 07:00
Victor McElheny

One of the sharpest controversies about our nation’s history is who gets top credit for the titanic American public-private partnership that won World War II with an avalanche of production. Some call it a rescue by private business, others view it as an example of Franklin Roosevelt’s multi-layered and often-mysterious leadership. How we see this episode surely is of immense relevance to how the coming revolution in energy will be handled.

America’s World War II production miracle, an epoch in the history of innovation, effectively began 75 years ago today, on May 28, 1940, with a phone call from President Franklin Roosevelt in the White House to William Knudsen, the production wizard who had risen to the presidency of General Motors, in Detroit.

Knudsen later recalled FDR’s words: “Knudsen? I want to see you in Washington. I want you to work on some production matters. When can you come down?” The call was not a total surprise. Bernard Baruch, the financier who had been U.S. production “czar” in World War I and who was lobbying furiously to do the job again in World War II, had suggested Knudsen’s name and warned him. Not hesitating, Knudsen told FDR he could get there in two days – he had to swing by New York and alert GM chairman Alfred P. Sloan.

May 28, 1940, was a black day. In little more than two weeks after striking westward, Hitler’s blitzkrieg had cut through the forces of Britain and France and smashed to the English Channel. That day, Belgium’s king was surrendering unconditionally to the Germans. That day, defeated allied soldiers, stripped of their weapons, began embarking for England in whatever could float. Civilization itself seemed to be collapsing. For the leader of the world’s biggest democracy, there was now one overriding task: defeat Hitler. And how could it be done? To FDR it was obvious: by a crushing mobilization of America’s productive power that began right now, when America formally was at peace.

Along with the irritable Charles E. Sorensen, another immigrant from Denmark, Knudsen took the lead in making a reality of Henry Ford’s automobile assembly line at Highland Park in 1913. But Ford and Knudsen eventually parted ways. Knudsen kept urging Ford to listen to customer demands, suggesting new models to follow the Model T. But Ford—did he feel a little crowded?—wouldn’t budge. So Knudsen resigned and went over to Sloan’s General Motors, and as head of the Chevrolet division, raced past his former employer and made Chevy the top-selling car in the world. Sloan promoted Knudsen to president of GM in 1937. Becoming a god of production and an automotive industry leader, Knudsen kept a mental map of all the leading players—and their factories.

With Roosevelt’s summons, the unpolitical Knudsen abruptly entered a new world driven by fear and resolve. Sloan was so angry that Knudsen was signing on with the architect of the New Deal to help prepare for World War II that he fired him on his way to Washington. So the man who lunched with FDR on May 30th was out of his $300,000 a year job.

But Knudsen thought he owed it to his adoptive country, and spent most of his remaining days maximizing America’s output of planes, guns, bullets, and the rest of what it took for complete victory. Working at first at a top policy level in FDR’s loosely structured White House, Knudsen bulled ahead with billions in emergency contracts, cutting deals like the one with Packard to make Rolls Royce Merlin aircraft engines for England’s Spitfires and another with Edsel Ford to build engines for U.S. warplanes.

This was just the start of long years of maximum entrepreneurial tension in wartime Washington. Right after Pearl Harbor, Roosevelt and his closest advisor, Harry Hopkins, concluded that Knudsen wasn’t the man for the essentially political task of serving as wartime “czar” for an ultimate boss who was determined to be the focus of major decisions. Knudsen learned of the change from a teletypewriter and sadly prepared to go home.

But Hopkins, War Secretary Henry Stimson, and his deputy Robert Patterson had other ideas. They persuaded Knudsen to put on the three stars of a lieutenant general and serve as the War Department’s chief expediter of production. Back in the trenches, but outranking just about everybody he met, Knudsen visited an average of a war plant a day. He also carried out crucial missions like the one to New Guinea in 1943, where George C. Kenney, Douglas MacArthur’s air boss in the Southwest Pacific, pleaded for continued manufacture of the twin-tailed, long-legged P-38 Lightning fighter that was highly suited for getting pilots safely back to base over wild jungles full of Japanese soldiers. Knudsen calmly told Kenney, “George, I gather you like P-38s. Okay, we’ll build them for you.”

Knudsen had spent decades learning the classical, almost overwhelmingly mundane lessons of the innovator in maximizing output. It required an appetite for the simple, not only in design of components as well as the finished system, but also in the smooth sequence of productive steps. Knudsen sought these in every factory visit. Typically stopping at work stations to converse with the workers, Knudsen would at the end of the day make suggestions for how to do it faster and better. He did this more than a thousand times over three exhausting years.

For both FDR and Knudsen, the operative word was the one Robert Lee said was the most beautiful in the English language: duty.

[Editor’s Note: This is the seventh of a series of posts about major anniversaries in innovation and what they teach us. You’re invited to suggest other milestones of innovation for in the Xconomy Forum. Example: This year will mark the 75th anniversary of Vannevar Bush obtaining President Franklin Roosevelt’s OK for mobilizing U.S. scientists in World War II.]

Further reading:

Arthur Herman, Freedom’s Forge: How American Business Produced Victory in World War II, New York, Random House, 2012, ISBN 978-1-4000-6964-4

Robert E. Sherwood, Roosevelt and Hopkins, An Intimate History, New York, Harper, 1948

Maury Klein, A Call to Arms: Mobilizing America for World War II, New York, Bloomsbury Press, 2013

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Retrophin Turns Asklepion Voucher Into $245M Sanofi Payday

Wed, 05/27/2015 - 10:32
Ben Fidler

File this one under shrewd dealmaking: Less than three months after buying a small drugmaker in Baltimore, MD, Retrophin has already made its money back—and then some.

New York- and San Diego, CA-based Retrophin (NASDAQ: RTRX) this morning sold what’s known as a priority review voucher to French drugmaker Sanofi in a deal worth $245 million. Sanofi will pay Retrophin $150 million up front, and then two additional $47.5 million installments in 2016 and 2017.

What makes the transaction significant for Retrophin is that it’s already recouped the money it spent acquiring Asklepion Pharmaceuticals in March—on top of the FDA-approved drug that came as part of the deal. Retrophin exercised an option to buy the Baltimore company for $28.4 million in cash, 661,279 shares of Retrophin stock, and another $42.2 million in future payments, according to a recent SEC filing.

In return, Retrophin got three key things: the voucher; cholic acid (Cholbam), a treatment Asklepion developed for ultra-rare bile acid synthesis and peroxisomal disorders; and $40 million in deferred tax liabilities.

These vouchers have become hot commodities. They’re awarded to companies that bring treatments to market for neglected tropical diseases and rare pediatric ailments, and enable a swifter a review from the FDA once a company files for approval of a drug. That can cut months out of a review process, potentially adding millions in revenue for a company, or give a drugmaker a leg up over a competitor with a rival therapy. They can also be used for any drug in a company’s pipeline, and be flipped like any other asset—the way Retrophin did today.

What’s more, Retrophin has gotten the highest price yet paid for these vouchers. Gilead Sciences (NASDAQ: GILD) bought a voucher from Canada’s Knight Pharmaceuticals in November for $125 million. Regeneron Pharmaceuticals (NASDAQ: REGN) got one from BioMarin Pharmaceutical (NASDAQ: BMRN) for $67.5 million before that.

Retrophin’s shares surged more than 30 percent when it bought Asklepion in March. Shares were up another 8 percent pre-market this morning after news broke of the voucher sale.

Retrophin has been reshaping itself in the wake of its split from former CEO Martin Shkreli. Now led by CEO Stephen Aselage, the company divested some assets earlier this year and is now built around development candidates for a rare kidney disorder called focal segmental glomeruloscerosis and pantothenate kinase-associated neurodegeneration, a life-threatening neurological disorder; two products for kidney stones and gallstones; and cholic acid.

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With Undisclosed Siemens Funding, CyberFlow Closes $4M Seed Round

Wed, 05/27/2015 - 03:55
Bruce V. Bigelow

San Diego network security startup CyberFlow Analytics said it has closed out its seed funding round after raising a total of $4 million from Toshiba America Electronic Components, angel investors, and Siemens Venture Capital, which did not disclose the size of its investment.

As part of the deal, CyberFlow also formed a strategic partnership with Siemens, according to CyberFlow president Tom Caldwell.

CyberFlow formed a similar partnership in 2013 with Toshiba America Electronic Components. At that time, CyberFlow disclosed that Toshiba had made a $2 million investment and that angel investors had contributed another $600,000. So it doesn’t take too much guesswork to estimate the Siemens investment, which closed the seed round, at about $1.4 million.

The funding raised from Siemens should enable CyberFlow to continue operating through 2016, when the company plans to begin seeking investors for its Series A financing round, Caldwell said. CyberFlow currently has 15 employees, he added.

Hossein Eslambolchi, a former AT&T chief technology officer, founded CyberFlow with Caldwell, a former Cisco executive, and Louis Gasparini, former CTO of RSA Security.

CyberFlow uses machine learning and advanced analytic software to monitor IP packets flowing into and out of the computer networks operated by the biggest companies in the world. The company establishes a base line of normal behavior for devices on a network—and then watches for deviations from the norm.

CyberFlow has sought to forge partnerships with global IT companies like Toshiba and Siemens that provide managed security services, which includes cloud-based network management, threat assessments, and incident response. “We provide the analytical engine they can provide as part of their software as a service,” Caldwell said.

More recently, though, CyberFlow has also focused on the emerging market for protecting the Internet of Things (IoT)—the wireless networking technologies that enable machine-to-machine communications among devices in power grids, oil and gas fields, refineries, and in other industrial applications. Siemens, for example, is focused on the market for industrial IoT security at chemical manufacturing plants.

Citing IT analysts, CyberFlow said an estimated 4.9 billion connected devices would be part of IoT networks this year, a 30 percent increase from 2014. The company’s statement quotes Eslambolchi as saying, “In today’s world, attackers use a variety of methods to attack organizations and CyberFlow analytics is bringing a new and unique solution to the market to thwart security attacks.”

Caldwell said CyberFlow also is anticipating a convergence of conventional IT networks and so-called SCADA (Supervisory Control and Data Acquisition) systems, the industrial monitoring and remote control equipment.

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After Orexigen Gaffe, What Role for Drugs Amid Obesity Crisis?

Tue, 05/26/2015 - 07:30
Alex Lash

Two recent happenings prompted this column. First, Orexigen Therapeutics drew fire from, well, nearly everyone earlier this month for an improper release of data related to its weight-loss drug Contrave. The second happening is Memorial Day weekend.

I’m assuming you, like me, did not spend the long weekend hunting and gathering, sharpening your arrowheads, and ranging far for firewood.

But that’s what our bodies still expect us to do, and they plan accordingly, storing as much energy as possible in our cells. “Humans are one of the few species who eat when we’re sad, happy, angry, even when we’re sick,” says Kevin Grove, an obesity expert at Oregon Health & Science University in Portland who was recently tapped to run Novo Nordisk’s obesity R&D group in Seattle. “It’s that secure feeling we get from various foods, whether it’s chocolate cake or a big steak.”

Our ancestors never knew when the next meal was coming. Now, the next meal is just a weekend barbecue or online delivery away, and it’s often filled with the fats and sugars we’ve evolved to crave but no longer have the lifestyle to burn off.

Which brings us to Contrave from San Diego-based Orexigen (NASDAQ: OREX). The drug is actually a combination of naltrexone, a substance-abuse deterrent, and buproprion, an anti-depressant, and it’s one of only four products approved for obesity in the U.S. in the past 15 years. All were green-lighted in the past three years. They generally work by suppressing appetite, and all are combinations (like Contrave) or reformulations of older drugs (like Novo Nordisk’s Saxenda, a higher-dose version of Novo’s approved diabetes drug liraglutide).

In other words, faced with a full-blown epidemic—35 percent of adults and 17 percent of children in the U.S. are obese, according to the latest figures from the Centers for Disease Control—doctors don’t have a lot of pharmaceuticals to prescribe.

Now both Orexigen and Contrave are under a dark cloud. After four years of regulatory pinball, the FDA approved the drug in September 2014 under special conditions. Among other things, Orexigen has to keep testing it for long-term cardiovascular side effects. It’s that work that has the company in hot water.

“It’s the latest in a series of—I won’t exactly say ‘failures’—but certainly problems coming up with drugs to treat obesity,” says Rick Hecht, director of research at the Osher Center for Integrative Medicine at the University of California, San Francisco.

In March, Orexigen filed a patent application that disclosed 25 percent of the heart study data and touted a purportedly positive benefit of Contrave in preventing heart attacks. But that ill-timed release, against the wishes of the academics running the trial, backfired. The FDA now says the trial is tainted; Orexigen has said it will do it again from scratch; and its R&D partner, Takeda Pharmaceutical, wants Orexigen to pay the entire bill—potentially hundreds of millions of dollars. What’s more, further testing that produced another 25 percent of the data reduced the positive cardio effect to neutral, according to a statement from Steven Nissen, the Cleveland Clinic cardiologist running the trial.

The Contrave situation could exacerbate what’s already a tepid response to the latest obesity drugs. “Doctors aren’t prescribing them,” says Edmund Pezalla, national medical director, pharmacy policy and strategy of the insurance giant Aetna. “It’s been a really slow uptake.”

The latest numbers compiled by RBC Capital Markets biotech analyst Simos Simeonidis show that the four big brand-name drugs have leveled off at roughly 30,000-to-35,000 prescriptions a week recently.

That’s about double the rate from the end of 2014, and if sustained for a full year would account for up to 1.8 million prescriptions. But here’s an interesting point of comparison: One study showed that in 2011, before any of the new drugs were approved, 2.74 million Americans were prescribed anti-obesity drugs. Assuming some of those Americans received more than one prescription that year, the current crop of drugs have a lot of catching up to do. (It’s also worth noting that most of those Americans in 2011 were being prescribed phentermine, one component of the notorious “fen-phen” combination that was taken off the market in 1997 after multiple deaths. The other component, fenfluramine, not phentermine, was the culprit).

Pezalla says that although the average weight loss for each drug is different, there’s a lot of overlap among patients, and no way of knowing prior to taking the drugs how effective they’ll be. It’s not just doctors who are reticent; Pezalla also notes that 85 percent of Aetna members are in plans that don’t cover weight-loss drugs.

Drugs have done tremendous things to fight some diseases in some parts of the world: turning HIV infection in developed countries from a death sentence into practically a chronic condition, for example. But they’ve done little good in other areas, including obesity. Why should we pin our hopes on pharma to melt away our societal fat?

Losing the war on obesity means a host of other complications for millions of Americans like diabetes, heart disease, hypertension, sleep disorders, and on and on. (The CDC estimates 86 million Americans over the age of 20 are in danger of turning diabetic.) A study last fall suggested obesity rates have stabilized—a tiny glimmer of good news—presumably with little to no help from pharmaceutical interventions.

But it seems drugs will have to be at least part of the solution, especially for the severely … Next Page »

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West Coast Biotech Roundup: Illumina, Veracyte, Otonomy, Kite & More

Fri, 05/22/2015 - 14:00
Alex Lash

Out west this week, the news flow was breezy. There were a sprinkling of diagnostics showers led by Illumina, which is in a patent fight with a Roche subsidiary, and Veracyte, which presented promising data for its lung test. It also seemed to be a week for pharma collaborations. Two pairs of partners signed pacts, while the Bay Area’s Ardelyx waited to hear whether its partner AstraZeneca wants to keep the relationship going. Onward to the roundup.

—Illumina (NASDAQ: ILMN), the San Diego-based maker of genome sequencing machines, said it has filed a new patent infringement suit against San Jose, CA-based Ariosa Diagnostics and Roche, the Swiss biopharmaceutical that acquired Ariosa six months ago. The suit extends a legal battle Illumina has been waging to clarify rights to technologies used in non-invasive pre-natal testing.

—Veracyte (NASDAQ: VCYT) of South San Francisco, CA, presented early data Wednesday that suggest its diagnostic technology can distinguish between idiopathic pulmonary fibrosis and other lung diseases, which the company said could help prevent unnecessary lung surgeries.

—San Diego’s Cypher Genomics said it is working with Celgene (NASDAQ: CELG) to identify the key genetic variants that determine whether or not a patient will respond well to a given clinical drug candidate. If successful, the technology might help Celgene generate statistically valid results in late-stage trials with far fewer patients.

—San Diego-based Fate Therapeutics (NASDAQ: FATE) priced a secondary offering on Wednesday of 6 million shares of common stock at $5 apiece, raising about $28 million. Fate’s stock was buoyed earlier this month when the biopharmaceutical announced a collaboration with Seattle-based Juno Therapeutics (NASDAQ: JUNO).

—San Diego’s Ambrx is being acquired by a consortium of Chinese drug companies and financiers for an undisclosed sum. The deal is expected to close by the end of June. The biologics developer’s most advanced candidate, licensed by Bristol-Myers Squibb, is a type 2 diabetes treatment in Phase 2. Ambrx withdrew an IPO attempt last summer.

—Santa Monica, CA-based Kite Pharma (NASDAQ: KITE) said Thursday it has dosed the first patient with refractory aggressive non-Hodgkins lymphoma in a Phase 1/2 trial of its cancer immunotherapy, KTE-019. Kite also plans to start three more trials of KTE-019 this year and is aiming to market its first product in 2017.

—Otonomy (NASDAQ: OTIC) released top-line Phase 2b data for its treatment of Meniere’s disease, an inner-ear condition. Although the results were mixed, Otonomy still intends to move the program forward into two Phase 3 trials by the end of this year, the company said.

—Ardelyx (NASDAQ: ARDX) of Fremont, CA, said Tuesday it will know soon if partner AstraZeneca will continue developing tenapanor, a treatment for irritable bowel syndrome, or return the drug’s rights to Ardelyx. The company reported positive Phase 2b results for tenapanor last fall.

—GenomeDx Biosciences of Vancouver, BC, and San Diego said a new study shows its Decipher diagnostics technology can be used beyond its existing application in diagnosing prostate cancer.

—Eureka Therapeutics of Emeryville, CA, will work with German pharma Boehringer Ingelheim on antibody-based treatments for cancer, the companies said Thursday. No terms were disclosed.

—The Sanford-Burnham Medical Research Institute of San Diego and Eli Lilly (NYSE: LLY) will work together on new treatments for autoimmune disorders like lupus and inflammatory bowel disease. Financial terms were not disclosed.

—The state of Washington’s Life Sciences Discovery Fund announced 10 new awards totaling $2.9 million. Recipients include both nonprofit researchers and private sector groups.

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EY Names Regional Finalists in 2015 Entrepreneur of Year Award

Thu, 05/21/2015 - 19:22
Bruce V. Bigelow

EY, the accounting and professional services firm formerly known as Ernst & Young, today named the founders and CEOs of 15 companies in San Diego and Imperial Counties for its 2015 EY Entrepreneur Of The Year Award in this region.

The awards are intended to honor entrepreneurs who demonstrate excellence and extraordinary success in such areas as innovation, financial performance, and personal commitment to their businesses and communities. The 15 finalists were selected from 65 nominations by a panel of independent judges. They are:

Rich Heyman, Aragon Pharmaceuticals / Seragon Pharmaceuticals CEO
Zeynep Ilgaz, Confirm Biosciences founder & president
Georgia Griffiths, G2 Software Systems CEO
Jeff Lunsford, Tealium CEO, and Mike Anderson, Tealium CTO
Bruce Hueners, Palomar Technologies CEO
Mary Ann McGarry, Guild Mortgage CEO
William Siegel, Kleinfelder CEO
Jeff Church, Suja Juice CEO
Robert Hayes, Herbert Mutter, and Peter Botz, Triton Management Services and Two Jinn co-founders
Christopher Lee, Access Destination Services CEO
Ben Hemminger, Fashionphile president
Lorne Polger and Mitch Siegler, Pathfinder Partners co-founders
Bill Keith, Perfect Bar CEO
Jeffery Sears and James Stuart, Pirch co-founders
JP McNeill and Nick Fergis, Renovate America co-founders

Award winners will be announced at a gala event on June 18, 2015, at The Grand Del Mar, San Diego.

Regional award winners will be eligible for consideration for the national EY Entrepreneur Of The Year program. The national award gala is set for Palm Springs, CA, on November 14.

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Neuro Startup Challenge Winners Try To Commercialize NIH Inventions

Thu, 05/21/2015 - 15:39
Jeff Engel

The winning teams were announced today in the Neuro Startup Challenge, a two-year-old virtual accelerator that helps academic researchers and entrepreneurs build companies around promising technologies developed by NIH researchers.

The 13 winners include a team from the Medical College of Wisconsin, which is launching a startup called Angio360 Diagnostics to commercialize a blood-based test to detect cancer in humans and pets. Other winners include teams from the University of North Carolina at Chapel Hill, Duke University, the University of Texas at Houston, and the California Institute of Technology.

The Center for Advancing Innovation (CAI), a Bethesda, MD-based nonprofit, started the competition as a better way to realize the potential benefits of the valuable research being done by NIH-employed scientists. The problem is the government agency isn’t really set up to effectively spin those patented inventions into biotech companies, says CAI founder and CEO Rosemarie Truman. “They don’t have a commercialization marketing group,” she says in a phone interview. “They don’t have anybody who pounds the payment and says, ‘Look at these inventions.’”

With the startup challenge, CAI evaluates a large pool of NIH patents to find the ones with the most potential for business success. Then it recruits entrepreneurial teams to form companies based around those inventions. The first startup competition focused on breast cancer, and it produced 11 startups, six of which have gone on to strike patent licensing agreements, Truman says. “This is an innovative approach to create a new channel to get these inventions out,” she adds.

More than 578 students and entrepreneurs from around the world formed 70 teams to compete in the second annual challenge, which launched last August and focused on therapeutics, devices, and diagnostic tests for neurological diseases. Over the next several months, the teams received mentorship from a horde of pharma executives, venture capitalists, and academic researchers, who helped them form business plans, craft their research and development strategies, and hone their pitches.

The winners announced today successfully passed through two phases of the contest. Now they enter the final stage, during which they will incorporate their businesses, apply to license the NIH patents, and begin the work necessary to earn regulatory approvals.

Although the winners aren’t guaranteed to acquire the patents they’re seeking, the challenge’s organizers say the “risk is remote” that another organization would swoop in snag the desired patents first. It’s unusual for NIH to receive more than one application for a family of patents, challenge organizers say. Plus, NIH’s tech transfer rules give preference to small business applicants, and challenge winners are getting advice about crafting a detailed application that should increase their chances of success.

The 13 winners will each receive a $2,500 cash prize from the Heritage Provider Network. Two other teams were named as finalists; they won’t get a cash prize. But all 15 teams will now receive additional mentorship and assistance with raising seed capital and negotiating license agreements with NIH, Truman says. In a few months, the teams will also have an opportunity to pitch their startups to a room of about 120 investors at a biotech industry conference.

The winners, of course, have a long way to go to achieve commercial success. Even if they grab the rights to key technology and seed funding, they must still navigate a series of potential pitfalls that any life sciences company faces, including proving that the technology works as envisioned, securing FDA approval, and convincing potential customers to buy their products.

Stephanie Cossette

Stephanie Cossette, co-founder and CEO of Milwaukee-based Angio360, is ready to give it a shot. Trying to build a life sciences startup is “very challenging, and I think will be very rewarding,” she says.

Cossette is a post-doctoral fellow specializing in tumor vasculature research. This is her first time leading a biotech startup. But she and several of her Angio360 co-founders have industry experience, including consulting for local biotech companies via a Medical College of Wisconsin program called Postdoc Industry Consultants, or PICO.

Cossette’s team—which includes seven people working part-time on the startup—has also received mentorship and business training through Milwaukee accelerators The Commons and Bridge to Cures, she says.

Angio360 intends to develop diagnostic products based on several blood biomarkers that are tied to blood vessel growth in tumors. “Because all solid tumors require blood vessels, this is a diagnostic tool that can be used for a wide range of cancers,” she says. Currently, the company plans to target brain and ovarian cancers, she adds.

It will develop diagnostic tests that could be used for early detection of tumors, measuring how well a cancer treatment is working, and monitoring tumor recurrence, Cossette says. Its customers would include doctors, as well as drug developers that could use it as a companion diagnostic. That’s also a “good opportunity” to find pharma partners “who would hopefully want to acquire us down the road,” she says.

Angio360 is trying to break into an increasingly crowded market of companies offering blood-based cancer tests, which include Johnson & Johnson, San Diego-based Epic Sciences, and Houston-based ApoCell, among others. However, these tests often target lung, breast, prostate, and colorectal cancer. There are fewer effective blood-based diagnostics targeting brain or ovarian cancer, Cossette says.

One interesting twist that could help Angio360 get off the ground: It will first target the pet care market.

Pet owners are spending more money on … Next Page »

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Companion Medical Raises $3M to Get Its Smart Insulin Pen to Market

Thu, 05/21/2015 - 01:58
Bruce V. Bigelow

Companion Medical, a San Diego medical device startup founded about 16 months ago, has raised $3 million in an ongoing Series B financing round led by an investment from Eli Lilly, according to a statement from the company yesterday.

“We will use the capital to attempt to achieve FDA clearance of our device as well as other development,” CEO Sean Saint wrote in response to a query from Xconomy.

Companion Medical has been developing an insulin injector pen that uses a Bluetooth link to connect to the patient’s smartphone. The injector pen sends data about the amount of insulin injected and time of use to a mobile app, and includes such features as a dose calculator and missed dose alarms. “The FDA has not yet cleared a Bluetooth pen (to our knowledge); we hope to be the first,” the CEO added.

Saint  declined to say how much capital Companion Medical had raised previously. Before founding the company, Saint was director of mechanical engineering and advanced technology at San Diego-based Tandem Diabetes Care (NASDAQ: TNDM), and worked before that at Santa Rosa, CA-based Alure Medical and San Diego’s Dexcom (NASDAQ: DXCM).

Companion Medical said in April, 2014, that it had received an undisclosed investment from the Swedish medical research company Diamyd Medical. In September, Saint walked away with an award for content that included prizes worth $5,000, based on a presentation he gave at the San Diego Tech Coast Angel’s 2014 quick-pitch competition.

In its statement, the company says Lilly’s investment, along with funding from other investors, could enable Companion to complete testing and seek a 510(k) clearance for its medical device and related smartphone app.

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Building an Agnostic Cloud Infrastructure

Wed, 05/20/2015 - 14:48
Anthony Skinner

Over the last two years I have often been asked: What is the best way to move out of Amazon Web Services (AWS) or other public cloud services? There are many reasons for making such a move, but cost, stability, and planned growth are the primary factors.

Many companies that surpass $50,000 a month in cloud costs on AWS begin to consider what types of things should be pulled out of the cloud or moved to another cloud provider. Companies often can’t make these moves quickly because they have optimized for AWS services with automated scripts for spinning up and down spot instances or deployment tools and development processes that are built around cloud computing in general and AWS in particular. Furthermore, not many companies have clients paying them to improve infrastructure, which typically makes infrastructure changes lower in priority to pumping out new features or fixing bugs. Thus, the simplest way to achieve such a move is to not get locked into vendor-specific features in the first place.

Moving cloud-based infrastructures to hybrid computing or on-premise computing is a well-covered subject. I figure that with so many companies starting up and growing rapidly, it would be more helpful for our fellow start-ups to talk about how to deploy an agnostic infrastructure that is capable of being run in a hybrid environment from day one. Why wait until you are stuck on one provider and do not have the time or resources to move? It is far better to plan and build for hybrid/multiple cloud vendors from day one.

Moz, where I previously worked, successfully moved a large part of its computing from the cloud to on-premise. It was, however, a large challenge due to prevalent AWS-specific tools and processes. To be more nimble, developers launching new products and implementing infrastructure today should think of agnostic computing from the beginning.

At iSpot.tv, where I was a board member before becoming chief of engineering and product earlier this year, software engineers led by Abe Lettelleir began laying the groundwork in late 2012 for being computing agnostic on a shoestring budget. I was able to pass on a few nuggets from hands on experience at Moz early in iSpot’s genesis, and I will highlight some of the decisions we’ve made at iSpot.tv along these lines.

On a given day, iSpot can ingest hundreds of thousands of videos, social interactions, and meta-data associated with TV ads to deliver real-time analytics to our customers. We must filter through millions of second-screen and social interactions along with thousands of television commercials, network show promos, and movie trailers.

We knew that we would need to take advantage of AWS regions and our own servers to ensure we had multiple location redundancy from day one. This architecture meant that if any portion of our processing pipeline failed we would avoid site-wide catastrophic failures or large amounts of backlogged data in need of processing in a short period of time due to down-time.

We did our research and determined it wasn’t necessary to spend top dollar to have a hybrid solution. Our development and test environments are built on refurbished hardware from The Server Store. We settled on Dell servers and used racks. We estimated about 20 percent of the servers we purchased would fail within in a few months and planned accordingly. No big deal, we wouldn’t lose data because our data was multi-homed and our teams wouldn’t be impacted by any failure. Using this strategy we also saved about 60 to 75 percent off list price of new servers. Bonus! As another bonus, the Dell servers have been much more reliable than our initial estimates. The failure rate of our refurbished Dell servers is closer to 3 to 7 percent.

Simple enough from a hardware perspective. However, we also wanted to ensure the developers didn’t have to use different processes to deploy, test, and run code in our on-premise servers as compared to AWS. Our senior systems engineer, Tao Craig, made our internal infrastructure mimic AWS using OpenNebula. Thanks to Tao and OpenNeubula the environments are identical to the developers.

This low cost, agnostic architecture allows us to deploy, move, and run our software pretty much anywhere we need it to be.

Our next challenge, which we’ll be tackling later this year, is to further broaden our cloud computing from AWS-only to other cloud providers such as Redapt and Google Computing Engine as well. Our generalised tools and procedures should allow us to do this without too much ado.

Moving out of the cloud can be as simple or as hard as you make it. It is key to keep your compute and storage generic as that will make it a lot easier for you to move from one cloud provider to another, or to on-premise. Sure, you might spend a little more time upfront, but when you need to scale and determine what you need to leave in the cloud and what you need to move to your own on-site infrastructure, you can do so in an expeditious manner—and before you are hit with a hefty cloud bill.

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Celgene to Use Cypher Genomics’ Data Analytics in Drug Development

Wed, 05/20/2015 - 09:00
Bruce V. Bigelow

Under a collaboration announced today, San Diego-based Cypher Genomics said it would use its biomarker discovery service to help New Jersey’s Celgene (NASDAQ: CELG) identify key genetic variants among patients who respond well to specific drugs.

If successful, the use of Cypher’s proprietary technology to pinpoint such “functional variants” could enable a drug maker to meet its end-point goals in late-stage clinical trials with far fewer patients, Cypher COO Adam Simpson said yesterday. The potential savings could be huge.

Genetic variation accounts for widely varying response rates that patients show to prescription drugs. As a result, doctors often prescribe a variety of drugs through a trial and error process until they see the appropriate patient response.

Unfortunately, at least a third of the money spent on prescription drugs in the United States is wasted, according to a 2012 study co-authored by Eric Topol, a Cypher Genomics co-founder and a prominent scientific advocate for using a patient’s own genomic data to determine the optimal drug therapy. Topol, who is a San Diego cardiologist, genomic researcher, and director of the Scripps Translational Science Institute (among other things), contends that wasteful patient spending on prescribed drugs that are ineffective or even harmful amounts to more than $100 billion a year in the United States alone.

As co-author Andrew Harper and Topol wrote:

Perhaps the best example of both waste and missed opportunity can be found with the three top-grossing prescription drugs worldwide; TNF α-receptor inhibitors (etanercept (Enbrel), infliximab (Remicade) and adalimumab (Humira)), are used in the treatment of rheumatoid arthritis with aggregate sales of nearly $30 billion. However, these three specific biological agents cost more than $15,000 per patient annually and only 40 percent of individuals respond to treatment.

“What we’re trying to do at Cypher is enable that type of companion diagnostics,” Simpson said, referring to diagnostic tests, including genome sequencing, that identify biomarkers that can be used to determine which patients could be helped by a particular drug and which would not.

While Cypher has conducted genome analytics in previous pharmaceutical studies, Simpson said Cypher’s collaboration with Celgene would be its first official study done with a major pharma. So how much savings could a pharmaceutical realize by using Cypher’s analytics?

Simpson said a study that applied the potential benefits of Cypher’s technology to the actual late-stage trial done for the prostate drug finasteride suggests that Merck could have saved as much as $211 million. That’s because Cypher’s analytics would have reached valid findings with about 1,000 patients instead of the 8,000-plus patients that Merck actually enrolled. The same study said a late-stage trial for the diabetes drug metformin, conducted with about 3,000 patients, could have been done with less than 1,000 with Cypher’s technology—at an estimated savings of about $63 million.

Simpson declined to discuss the financial terms of Cypher’s partnership with Celgene, saying he would not comment on their relationship beyond the press release.

Cypher Genomics developed Coral, its proprietary, high-speed information technology to annotate and analyze the computerized data generated by so-called next-generation genome sequencing machines like Illumina’s HiSeq X Ten. The company also has developed Mantis, a software-as-a-service offering that uses its core genome interpretation technology to identify genetic variants among patients whose genomes have been sequenced.

According to Cypher, manual processes for interpreting genomic data are prohibitively slow and costly (estimated at about $15,000 per genome).

Cypher says its automated genome interpretation technology can quickly identify genetic markers and their contribution to therapeutic responses and disease management. In today’s statement, the company quotes Cypher CEO Ashley Van Zeeland as saying, “Cypher has shown through multiple validation studies that our Coral technology can find novel biomarker signatures in genomic data from small clinical studies.”

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Fate Therapeutics, Riding High on Juno Deal, Raising More Cash

Tue, 05/19/2015 - 12:41
Bruce V. Bigelow

Taking advantage of a healthy bounce on Wall Street, San Diego’s Fate Therapeutics (NASDAQ: FATE) said Monday it plans to sell 6 million shares of its common stock through a secondary public offering.

All shares of common stock to be sold in the offering will be offered by the company. With Fate shares trading at about $6.45 this morning, the company would raise gross proceeds of more than $38 million.

The company has been riding a wave of investor enthusiasm since May 6, when Fate’s stock gained 46 percent, soaring from $4.96 to $7.24 a share, after Fate and Seattle-based Juno (NASDAQ: JUNO) said they were collaborating to boost the effects of Juno’s hot immunotherapeutics technology.

Juno agreed to pay Fate $5 million in upfront cash, and invested another $8 million for 1 million Fate shares.

Analyst Jim Birchenough of BMO Capital was among those who interpreted the collaboration as a validation of Fate’s technology for using small molecule combinations to modulate the fate and function of cells. He reiterated his “outperform” rating and $15 price target for the company.

Fate’s lead product candidate, is in clinical development for the treatment of hematologic malignancies and rare genetic disorders in patients undergoing hematopoietic stem cell transplantation (HSCT).

In its statement yesterday about the secondary public offering, Fate said it intends to use its net proceeds for clinical development and research activities, working capital, and other general corporate purposes. Fate said it also plans to grant underwriters an additional 900,0000 shares of its common stock.

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Four Tough Questions Startup CEOs Need to Ask to Scale

Tue, 05/19/2015 - 11:26
James Geshwiler and Lori Dernavich

Mark Organ thinks very differently about how to evolve as a founder-CEO now that he’s on his second company. A decade ago, Mark co-founded customer relations management software company Eloqua. “I held on too long to all the details of the business,” he says.

Even though the company had reached several million dollars in revenue, “I really enjoyed going on sales calls and the rush of closing deals, but if we had hired a head of sales six months earlier, we would have grown faster. I was a novice salesperson and should have hired a great sales leader.” Eventually, he left the company, which went on to go public with different leadership.

This time, founding and running Influitive, an advocate marketing platform that helps businesses manage and motivate their most influential customers to drive referrals and references, he’s hired managers sooner, learned to delegate, and to make a mental transition. (Note: CommonAngels Ventures is a seed investor in Influitive, and James Geshwiler was on the board of directors for two and a half years.) “Early on at Influitive I called myself ‘founder’,” Organ says. “Now I call myself ‘CEO.’ When I am in the office, I often feel like I’m a bureaucrat, rather than a swashbuckling entrepreneur! I don’t actually do much directly, and constantly need to ask myself ‘do I need to make that decision or should I have empowered someone else who has more knowledge or expertise than me.’”

“The founder-CEO is a great generalist,” he says. “They can do a lot of things in a good-enough way. They are willing and able patch the holes in the ship as required.” That is mission-critical at the nascent stages when a company is getting established and seeking to find product-market fit. However, once two key things take place, the company must shift to what we call scaling: 1) market growth is accelerating—not just for this company but for most of the players in the market, and 2) the company has learned how to hire more people effectively and understands how long it takes for those new hires to generate enough revenue to pay for themselves. Scaling is not a luxury at this point—it’s a necessity to avoid being left behind.

Recognizing that the time for scaling is approaching—and laying the groundwork for it—is really hard. It’s clouded with the complexity of never-ending tasks and frequent crises. It also involves as many internal issues as external ones. To help the CEO navigate this period, we have developed this list of four tough questions startup CEOs need to ask themselves in order to lead the company into the scaling phase:

1. Have we actually hit product-market fit? Failing to elevate the company to its next state fast enough can lead to failure, but so can doing it prematurely. Paul Aitken, CEO and founder of Borro, knows the struggles of hitting the right window. He says, “We’ve hit product-market fit in the last nine months. This has come through times when we have not moved along at a fast enough pace, and times when we have been too fast and gotten ahead of ourselves.” Borro launched in 2009 in the UK, and has gone on to open offices in New York and Los Angeles. It is the leading online platform for luxury asset-backed lending and has raised over $200 million in total capital. Very few companies get the timing of product-market fit perfect. The key is in how quickly you react when you don’t have it right. For instance, you thought you found that fit so expanded your sales team to bring in the “guaranteed” customers, only to find out sales didn’t occur. You’re strapped for cash, so do you keep funding the new hires or retrench until you find that fit. It’s a very tough question with no clear answer, so many CEOs choose to wait to get more information. However, not making this decision fast enough could mean the loss of your business.

2. Can I stop being addicted to being an individual contributor and start viewing success as being able to hire transformational people? Founders often start out as the business and product expert. As the company grows, so must the knowledge, and one person just can’t know it or do it all. You wish you could clone yourself, but that hasn’t been invented yet. You must trust others with your baby and accept that you need additional talent if you’re going to scale. “You need to be excited about your job changing,” Organ says,” and let go of the rush of working on product and doing sales calls. Stop obsessing about product and start obsessing about recruiting.” Aitken sees the necessity of recruiting well, too, but also says that “even after doing startups for 11 years, I still have situations where I know I have gaps, but finding the right person to fill them seems a major challenge every time.” Recruiting should always be on a CEO’s mind.

3. If I hire transformational people, can I learn to manage them? “If you’re good at hiring, then they are smarter than you and more skilled than you are,” Organ cautions. Some will downright outsmart you whether for compensation or in technology choices to suit their own ends. You have to establish and maintain trust as well as have open lines of communication. The CEO needs to set up clear expectations, measure against them, and compensate accordingly. “Even I’m getting paid differently,” Organ says. “The board now compensates me more like an outsider because I’m paid to lead, and if I can’t do that then the board should bring in someone who can.” Setting up clear expectations should also go hand in hand with what Aitken says is critical, “to empower them with resources to allow them to try things out.”

4. Which kinds of processes will we need to have in place? (And, which do we need to stop?) The CEO needs to know the first cohort of customers intimately. “As soon as you start to see the new customers look like the old customers,” Organ warns, “it’s time for the founding CEO to get out of the day-to-day sales process.” Instead, the CEO needs to shift his or her focus to company operations to support sales and the increasing number of customers:

i) Communication processes. No longer will it be a tight group of comrades sitting around with the ability to constantly share information. You won’t be able to touch base with people every day. The company needs a clear mission, shared vision, and explicit values.

ii) Product roadmap. Determine priorities and tasks rather than just lists of features. And, importantly, stay on schedule because there are a growing number of interdependencies. CEOs, and all managers really, should be working to eliminate obstacles and distractions so their people can do their jobs. A product roadmap is a tool to prevent you from getting off track.

iii) HR Processes. “It was a controversial move,” Organ says, “but I hired a ‘VP of Talent Operations’ early on when we were only about 55 employees to make HR a core competence.” Without process, interviewers typically ask the same questions and the questions are not strong enough to elicit the rich feedback the company is seeking. Rather, recruiting should have benchmarks to be able to compare candidates objectively. Influitive measures the hard costs of hiring, and has division of labor in interviewing, with assigned roles and scoring. Companies also need onboarding and training processes. No longer is it enough to show them to the nearest open seat and provide them with a laptop and a phone.

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Battle to Regulate Uber, Lyft Moves From City Halls to State Capitols

Mon, 05/18/2015 - 14:39
Jeff Engel

[Updated 5/19/15, 10:40 a.m. See below.] The push to regulate increasingly popular ridesharing services like Uber and Lyft has shifted from city halls to state capitol buildings—with implications for the companies’ reputations and expansion plans, as well as the future of transportation systems worldwide.

Last year saw passage of the first rules for ridesharing companies—or “transportation network companies,” as they’re often called in such legislation—at either the municipal or state level. Legislators in 17 U.S. cities and three states—Colorado, California, and Illinois—approved measures in 2014 that provided the companies a pathway to legalization, according to the Wall Street Journal and Xconomy research.

That activity has ramped up around the country this year, especially in state legislatures. As of this writing, 15 governors have signed ridesharing bills into law in 2015, according to research by Xconomy and Douglas Shinkle, a transportation policy expert with the National Conference of State Legislatures who has been tracking ridesharing legislation nationwide.

More ridesharing laws could follow. Nearly every remaining state has considered similar legislation this year, and there are several bills pending, Shinkle says. Those include proposed laws in Massachusetts, Michigan, and North Carolina.

The legislative barrage seems to be “springing from the prevalence and proliferation of these services, and folks wanting to have some basic regulatory framework in place,” Shinkle says.

The companies’ mobile apps let consumers book rides around town from private drivers. The companies don’t own the vehicles, and the drivers are paid as independent contractors. When entering new markets, these companies have operated in a state of questionable legality that has led to clashes with city officials and the taxi industry.

Despite these hurdles, Uber and Lyft have expanded rapidly. Uber, founded in 2009, has reportedly raised more than $5 billion in equity and debt—a record for a private company, the Wall Street Journal reported. Its service is now available in more than 280 cities across 57 countries, mostly concentrated in the U.S. Launched in 2012, Lyft has raised about $1 billion from investors and has drivers in 60 U.S. cities. [This paragraph was updated to include the latest fundraising total for Lyft.]

Initially, Uber and Lyft took a bold expansion approach: set up shop in a city, ask questions later. The idea, as the Wall Street Journal noted earlier this year, was to quickly build a big, vocal base of riders and drivers in a new market, then use that popular support to ward off challenges.

Sources: Douglas Shinkle, National Conference of State Legislatures; Xconomy research States that have passed ridesharing laws 2014 2015 California Arizona Colorado Arkansas Illinois Georgia Idaho Indiana Kansas Kentucky Maryland Montana North Dakota Oklahoma Utah Virginia Washington Wisconsin

But over the past year or so, the companies have appeared more willing to work with legislators to move their services out of legal limbo.

Uber, for example, has publicly voiced intentions to shift from combativeness to compromise. The company is working with regulators “in markets across the world,” spokeswoman Lauren Altmin says in an e-mail message to Xconomy.

Last year, Uber hired David Plouffe— President Barack Obama’s former campaign manager and political adviser—to help hone its public messaging and oversee its policy initiatives. (Plouffe’s role is being taken over by Rachel Whetstone, previously Google’s public policy and communications leader. Plouffe remains an Uber adviser and took a board seat, Re/code reported last week.)

Plouffe has been “instrumental in helping to refine” Uber’s communications strategy and making it more “level-headed” and “cooperative,” says Matt George, CEO of Bridj, a startup that runs a demand-driven, private bus service in Boston and Washington, DC. He believes the companies in the transportation technology industry have moved toward cooperation on innovation—and are doing so “in fundamental partnership with those that are entitled to protect the public good, which is our government,” he adds.

Shannon Liss-Riordan, a Boston attorney representing drivers in separate lawsuits against Uber and Lyft, sees the companies’ recent approach differently: “They’re trying to legislate themselves into legitimacy after having to force their way into various markets. Now they’re trying, after the fact, to get the rules written to allow them to be there.”

Uber’s Altmin didn’t directly answer Xconomy’s question about why the company has started working more closely with legislators.

It’s not likely that these legislative debates are putting the future of the ridesharing industry in jeopardy. The services have become so popular among consumers that even the most staunchly opposed regulators don’t expect to put the genie back in the bottle. Many politicians have expressed willingness to accommodate—or even excitement to embrace—this emerging industry by creating a regulatory framework that aims to balance consumer protections and public safety with the companies’ business models.

But the pace of expansion for Uber and Lyft could be affected by the state laws that get passed, as the companies evaluate on a case-by-case basis whether the rules are too onerous for them to operate in different markets. (More on that below.) Although regulations might bring higher business costs, securing widespread legal approval would probably allow executives and investors—who have hundreds of millions of dollars on the line—to breathe easier.

Whatever the motivation of the companies, the increased legislative activity around ridesharing is hard to miss.

Shinkle thinks the emerging industry has become a top agenda item for state legislatures mainly because Uber and Lyft have quickly expanded beyond large metropolises into a growing number of smaller cities and suburbs. “It’s become clear that this is not something that’s just going to be a service offered in large cities,” Shinkle says.

The state laws that have been enacted obviously have broader geographic reach than municipal ordinances, which likely simplifies things for Uber and Lyft. In Wisconsin, for example, the companies now only need to follow the state law approved recently, which trumps rules passed earlier by the cities of Milwaukee and Madison.

In general, the state laws are similar to one another, Shinkle says. They have primarily focused on … Next Page »

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Still Room For Great Guests at Napa Summit 2015—Request An Invite

Mon, 05/18/2015 - 10:43
Robert Buderi

“It’s like a mini-Davos.”

That’s the way one leading venture capitalist describes Xconomy’s Napa Summit. And while he is perhaps a bit effusive, we do believe our annual retreat in wine country is something special. Maybe you can judge for yourself.

We are just two weeks away from Napa Summit 2015, which will take place on June 1 and 2. And there is still time for you to request your invitation to our most exclusive event of the year. Just write to us at Napa15@xconomy.com. Tell us a bit about yourself, and what you do.

You can see the full speaker lineup, agenda, and other details on our Napa Summit event site. But I’ll be doing chats on investing trends—and strategies for dealing with them—with both Dave McClure of 500 Startups and Scott Sandell of NEA, outgoing chairman of the National Venture Capital Association.

Beyond that, some highlights include a session with computer legend Gordon Bell on the increasing ability to capture everything digitally, and a chat between Siri co-inventor Dag Kittlaus and Microsoft EVP for technology and research Harry Shum on the future of AI. Long Tail author Chris Anderson will tell us about his drone company, 3D Robotics, and even give us a lunchtime demo.

For those interested in the frontier of genomics and health, we have Stephen Quake of Stanford and Jennifer Doudna from UC Berkeley, whose discoveries on gene editing are drawing headlines. We even have special Deep Dive sessions—a bit more up close and personal than the plenary talks—on Connected Cars, The Future of Money (think bitcoin to Apple Pay), and Does the Internet of Things Matter in Consumer Services?

With all that and more in store, I think I can safely say that the fourth incarnation of The Napa Summit: The Xconomy Retreat on the Economy, Jobs, and Growth is shaping up to be the best yet. Not only are the speakers off the charts, the guest list is, too.

It all starts the evening of Monday, June 1, with a winery tour, tasting, and dinner at Silver Oak Cellars (the picture is what will await you when you walk into the dining room—be prepared to drink some great wine!). Then it continues the next morning with the summit itself at the nearby Villagio Inn & Spa. Registration is $1,495, which includes the dinner and breakfast and lunch the next day, with discounts for startups and government/non-profits (lodging and travel are separate).

After it’s all over, you can head back to the Bay Area, or stay on for more wine! This year at our post-event reception we will be sampling some wines from Ackerman Family Vineyards, owned by venture capitalist Bob Ackerman of Allegis Capital.

Again, you can find more the details here. We have just a few attendee spots remaining—and if you would like an invitation to this event, we’d love to hear from you at Napa2015@xconomy.com.

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That First Move Can Be a Doozy: Why Peach Expanded to San Diego

Mon, 05/18/2015 - 02:06
Bruce V. Bigelow

Seattle-based Peach makes its debut in San Diego today, and therein lies a tale.

The question, “Where do we expand first?” can be one of the hardest decisions confronting an early stage tech company looking to rapidly scale its business beyond the hometown market.

Peach, founded in early 2014 by three ex-Amazon software engineers, began in the crowded food tech sector by taking a slightly different approach to creating technology that handles orders for take-out food delivery.

Instead of creating a comprehensive Web and mobile app platform for online orders like many of their competitors, the Peach team focused solely on processing weekday lunch orders, using an SMS/text-based ordering system that is simplicity itself. The company partners with restaurants that provide workplace lunch deliveries under a revenue-sharing agreement.

Peach keeps the process pretty basic. Users indicate a preference for vegetarian, light, or meaty fare when they register. Every weekday, Peach sends a text message at 9:30 am to its users that offers a single lunch offering, with a message that says, “Reply YES to order.” A restaurant partner fulfills the order and delivers the featured lunch. To vary the menu, Peach rotates the restaurants among its users each week.

Laura Sullivan of Deli Llama and friend

There are no delivery fees, but to optimize costs, Peach currently arranges deliveries only to corporate offices or office buildings that have at least 50 Peach-registered users. So far in San Diego, Peach has struck deals with such restaurants as The Taco Stand in La Jolla, Deli Llama in Hillcrest, and Sushi Hana in Rancho Penasquitos.

As Peach marketing chief and San Diego advance man Andrew Bleiman explained to me, “Our whole value proposition to restaurants is they’re going to do the food delivery, but we’re going to guarantee at least 20 meals a day they can deliver to different places for over three months.”

Text Order Flow of Peach SMS

In other words, Peach provides restaurants with takeout order processing and food logistics services. The startup’s analytics technology also enables Peach to predict the volume of orders for its restaurant partners three weeks in advance.

Bleiman said Peach has grown rapidly in Seattle, and the team spent the past year or so refining their business model. The decision to expand became a priority at the end of 2014, and Peach selected San Diego earlier this year.

“We chose San Diego because of the concentration of medium-to-large tech firms in Sorrento Valley and surrounding areas [that] weren’t within easy striking distance of great lunch options,” Bleiman said.

While the Peach team considered bigger cities, such as Los Angeles, San Francisco, and Chicago, Bleiman said a variety of … Next Page »

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West Coast Biotech Roundup: Orexigen, Denali, Nant, ASCO & More

Fri, 05/15/2015 - 14:54
Alex Lash

This week’s roundup has an elevation change. In San Diego, Orexigen Therapeutics, maker of a weight-loss drug, dug itself deep into a hole with the FDA, its clinical collaborators, and its business partners. In San Francisco, Denali Therapeutics debuted with a mountain of cash to tackle neurodegenerative diseases.

L.A. billionaire and partial Laker owner Patrick Soon-Shiong’s NantWorks biomedical empire was in the news, and there were drips and drabs of data from West Coast companies among the flood of abstracts released in advance of the annual American Society for Clinical Oncology meeting later this month. I also spent time examining the next big hurdles for cancer immunotherapy in my column this week, with Juno Therapeutics and other West Coast companies in the mix. Time to round it all up.

—Shares of San Diego’s Orexigen Therapeutics (NASDAQ: OREX) slumped more than 15 percent Wednesday over more fallout from a long-term study the FDA required after it approved Contrave, the company’s weight-loss drug, last year. The study aimed to assess whether patients taking Contrave faced a higher risk of serious heart problems. In March, Orexigen prematurely released early results of the study, and the data appeared to show that Contrave might reduce cardiovascular risks. On Tuesday Orexigen said it had terminated the study early and now plans to conduct a new trial. The company’s conduct triggered withering criticism from Steve Nissen, the cardiologist overseeing the study, as well as a deep dispute with Takeda, Orexigen’s strategic partner.

—Three Genentech alumni launched Denali Therapeutics in South San Francisco, CA, with $217 million in venture funding to develop treatments for Alzheimer’s, Parkinson’s, and other neurodegenerative diseases. Arch Venture Partners, Flagship Ventures, Fidelity Biosciences, the Alaska Permanent Fund and others are behind the financing.

ASCO: Puma Biotechnology (NYSE: PYBI) of Los Angeles saw shares fall almost 19 percent Thursday after abstract data revealed little difference between its breast cancer treatment neratinib and other treatments, as well as a high rate of serious diarrhea among trial participants. Puma chief Alan Auerbach told Forbes that problems with genetic testing of trial participants skewed the data.

ASCO: Roche division Genentech of South San Francisco, CA, released interim Phase 2 data that its checkpoint inhibitor MPDL3280A doubled the likelihood of survival in non-small-cell lung cancer patients, compared to patients taking chemotherapy. The increased survival was correlated with patients whose cancer had high levels of the protein PD-L1, which MPDL3280A targets. The FDA has granted the drug a breakthrough designation.

—Patrick Soon-Shiong’s NantPharma is buying the cancer drug Cynviloq for $90 million upfront from Sorrento Therapeutics of San Diego (NASDAQ: SRNE), and potential payments could total more than $1 billion. Sorrento has partnered with other parts of Soon-Shiong’s NantWorks conglomerate before. One of those parts, NantBioScience, apparently has raised $100 million recently, according to an SEC filing first spotted by MedCityNews.

—Juno Therapeutics (NASDAQ: JUNO) of Seattle bought 23-person German biotech Stage Cell Therapeutics for €52.5 million (about $59 million) in cash and 486,279 shares of Juno stock. Juno could pay up to €270 million ($308 million) more in milestone payments.

—Trade groups BayBio and the California Healthcare Institute consummated their merger, launching the California Life Sciences Association this week.

—Vaccine firm PaxVax of Redwood City, CA, said that president and COO Nima Farzan will take over as CEO. He is replacing cofounder Kenneth Kelley, who will remain a director.

—San Diego-based Organovo (NASDAQ: ONVO) has signed an agreement with the U.S. subsidiary of the French cosmetics giant L’Oreal to develop 3D-printed skin tissue to use as an alternative to animal testing of skin care products.

—Alder Biotherapeutics of Seattle released Phase 2 data for its migraine treatment, ALD403, that showed 16 percent of patients taking the drug were migraine-free for three months and 11 percent for six months. No one taking placebo was migraine-free over those periods. The company said it would run two trials in the second half of 2015 to find the right doses for the drug.

—U.S. senator and presidential hopeful Bernie Sanders (Ind-VT) asked the Department of Veterans Affairs to use emergency measures to break patents and lower the prices Gilead Sciences (NADSAQ: GILD) and AbbVie (NYSE: [[ticker:ABBV])) charge for their hepatitis C drugs.

—Aspyrian Therapeutics of San Diego, which uses near-infrared light to activate an immune response targeting certain types of tumors, said it has the FDA’s green light to begin the first clinical studies of its lead candidate, RM-1929. The drug is a light-activated antibody-drug conjugate that aims to treat recurrent head and neck cancer.

—San Francisco’s IndieBio accelerator said it would bump the amount of seed funding it provides to its participants to $250,000 per company.

—Xconomy San Diego editor Bruce Bigelow contributed to this report.

—Featured photo “Santa Cruz surfing” courtesy of Wonderlane via a Creative Commons license.  

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New Venture Studio Cursive Labs Raises $2.2M for DIY Startups

Thu, 05/14/2015 - 04:40
Bruce V. Bigelow

The Bay Area has Giant Pixel and Monkey Inferno. New York has betaworks and Thirty Labs. Boston has Blade and Redstar. Los Angeles has Science. Now San Diego has Cursive Labs, a “venture studio” founded by a team of entrepreneurs who prefer to start and build their own digital technology ventures.

The operational details may vary from place to place, but venture studios represent a new paradigm in the innovation ecosystem. In general, though, a venture studio operates as a kind of holding company that enables experienced entrepreneurs to pursue their own ideas and use their own resources to start and grow tech companies in-house.

Established last summer by six co-founders, Cursive Labs recently closed on $2.2 million in Series A funding from Crescent Ridge Partners, Wavemaker Partners, Howard Lindzon of Social Leverage, Keshif Ventures, Bootstrap Incubation, and other Southern California investors.

“We really believe in the venture studio model,” Cursive Labs co-founder Ryan Bettencourt told me this morning. “The idea is a new way to get a business off the ground quickly, and see if there is something there or not.”

While such terms as “incubator,” “foundry,” and “accelerator” might seem interchangeable to many entrepreneurs, Cursive Labs co-founder Jon Belmonte said a venture studio takes a fundamentally different approach to the business of starting new companies.

In an incubator or accelerator, Belmonte said, “You’re helping other people start their companies. In a venture studio, you’re building your own companies. You have 100 percent equity ownership, you’re in control, and you’re betting on yourself instead of somebody else.”

Where investing in the right team is often the paramount criteria for venture investors, Belmonte and Bettencourt contend that a venture studio mitigates the risk of investing in the wrong team because the same team works together on every startup.

Some observers might rightly ask, “Isn’t one startup usually hard enough for even a highly talented and experienced team?” Maybe. At Cursive Labs, however, outside entrepreneurs need not apply.

Belmonte and Bettencourt, who together serve as Cursive Labs’ managing directors, said their core skills are in operations—Belmonte was the former CEO and longtime COO of the Active Network and Bettencourt is a serial entrepreneur with leadership roles at San Diego’s KidZui, Blurtopia, CellarThief, and Digital Telepathy.

Cursive Labs founders (from left) Ryan Bettencourt, Josh Schlesser, Jon Belmonte, Evan Witte, Kieran Flanigan, Grant Bostrom

They also enlisted former colleagues Josh Schlesser, the Active Network’s former senior vice president for technology; Keiran Flanigan, a veteran mobile developer and Blurtopia co-founder; Grant Bostrom, a KidZui strategist and expert in marketing, growth hacking, and product development; and Evan Witte, a product developer on key projects at the Active Network.

Cursive Labs already has two digital media companies under development: Spoutable, an advertising platform for … Next Page »

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Angel Investors Still Awaiting the Impact from Equity Crowdfunding

Thu, 05/14/2015 - 01:01
Bill Payne

After reading that angels would be the No. 1 losers due to the explosive growth of crowdfunding, angels like me have been keeping a wary eye on equity crowdfunding. Some reports in the press have suggested that crowdfunding could actually replace angels as a capital source.

So far, the warnings have turned into a big yawn. But here are the concerns for angel investors, along with my perspective on the situation today:

Has crowdfunding negatively affected total angel investment in the United States?

The short answer is no. According to Jeff Sohl, director of the Center for Venture Research at the University of New Hampshire, total angel investment in the US has grown steadily since 2010 when the JOBS Act was passed, from $20 billion annually to an estimated $25 billion in 2014. Yet as crowdfunding grows, total angel investing might be undermined.

How much capital is flowing to entrepreneurs through online platforms in the United States?

Total equity crowdfunding by accredited investors in the U.S. was about $300 million in 2014. That’s only about 1 percent of the $25 billion total angel investment in the U.S. last year. All types of crowdfunding in the U.S. last year amounted to roughly $7.5 billion.

How much of that was equity crowdfunding?

My data, consolidated from a variety of sources over the past six months, shows that equity crowdfunding accounted for only 5 percent of this $7.5 billion. The remainder falls into the other categories of crowdfunding, which are donation-based, reward-based, real estate, and peer-to-peer lending.

Currently, equity crowdfunding in the United States is only legal for high net-worth individuals who qualify as “accredited investors,” under existing securities laws. The Securities and Exchange Commission is expected to finalize new rules for public equity crowdfunding in the next year or so. But it is not yet clear whether these new rules will change the way entrepreneurs raise capital. In Europe, where public equity crowdfunding has been legal since 2010, equity crowdfunding makes up only about 5 percent of total crowdfunding (according to Massolution and Nesta).

So far, public equity crowdfunding just hasn’t made much of a difference—at least in Europe.

Since there are several flavors of crowdfunding, pundits seem confused about the fraction of crowdfunding flowing into startup ventures. There is no question that crowdfunding is exploding. According to Massolution, worldwide crowdfunding reached $16.2 billion in 2014, more than double the $6.1 billion raised through global crowdfunding in the previous year.

But, let’s dig a little deeper. As mentioned above, crowdfunding comes in several flavors, including:

—Donation-based: philanthropic or sponsorship-based incentive

—Reward-based: non-financial reward, token gift or early product

—P2P Lending: interest plus repayment of the original principal

—Real Estate-based: debt and equity investments in real estate projects

—Equity-based: funding in exchange for a percentage of equity

By scouring crowdfunding websites, published articles, and public documents, I estimate that total crowdfunding in the U.S. is about $7.5 billion (see table below), or nearly half the $16.2 billion in crowdfunding dollars raised around the world last year. Publicaly disclosed data is shown below in parenthesis for those companies that chose to report data. Only a small number of platforms have released funding data, but the ones that disclose tend to be the larger crowdfunding sites in each category.

Estimated U.S. Crowdfunding in 2014

Crowdfunding Category 2014 Total Examples of Platforms Donation-based $0.4 Billion RocketHub.com, GoFundMe.com ($0.15B) Rewards-based $0.8 Billion Kickstarter ($0.5B), Indiegogo ($0.1B) Peer-to-Peer Lending $5.0 Billion LendingClub ($4.4B), Prosper (est $0.4B) Real Estate $1.0 Billion FundRise ($0.2B), Prodigy Network Equity $0.3 Billion AngelList ($0.1B), CircleUp Total $7.5 Billion

How much of this crowdfunding flows into the startup economy? Donation crowdfunding wouldn’t count; those dollars flow into not-for-profits. I wouldn’t expect to see much P2P lending in the startup sector either; investors usually don’t loan money to entrepreneurs. Real Estate is a separate asset class. So entrepreneurs typically only use rewards and equity crowdfunding to start their enterprises.

About one-quarter of Kickstarter funds flow into technical projects, but not as equity. Sources of rewards crowdfunding are exchanged for a token gift (a T-shirt), a prototype product, or perhaps a discount on a future product purchase. Rewards crowdfunding can provide excellent market validation for the products of startup companies.

But only equity crowdfunding gives investors an ownership stake in startup ventures. AngelList, estimated at one-third of the US market, facilitated the funding of about 250 companies in 2014, while Sohl’s data shows that angels funded over 50,000 companies in each of the past several years.

Finally, how do most angel investors view equity crowdfunding?

—Most angels I know would consider investing in startups using an accredited investor crowdfunding platform, providing that the syndicator is a credible lead investor and can provide robust due diligence to them prior to investing.

—Most angels would be hesitant to invest with (or even after) unaccredited investors, just as they would be reluctant to invest alongside any unsophisticated investors. The risk of investing in startups is always huge. No need to pile on additional risk via the pool of investors in any venture.

In other words, I would say that reports on the demise of angel investing by crowdfunding have been greatly exaggerated. The angel investment community in the United States remains healthy, and as of 2015, we’re relatively unaffected by the commotion over crowdfunding.

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